Differentiated price loss aversion in destination choice: The effect of tourists' cultural interest

Abstract

This article looks into the differentiated effects of loss aversion depending on whether individuals show cultural interest when choosing a destination. Based on the fact that perceived value implies not only sacrifices but also the expectations of a certain level of quality and prospects of satisfaction, together with the idea the Prospect Theory applies to tourism prices, the article states the hypothesis that interest in culture when choosing a destination lowers people's loss aversion. By incorporating the reference-dependent model into a Multinomial Logit Model with Random Parameters - which controls for heterogeneity - the empirical application shows that culture-interested tourists are less loss averse; i.e. the negative effect of finding a higher than expected price diminishes with cultural interest. The expectation of enjoyment of these attributes and the more conscious attitude toward maintenance/restoration activities of cultural sites are hypothesized to lead prices to be evaluated differently when selecting a destination.